Under a System of Flexible Exchange Rates, Which of the Following

question 144

Multiple Choice

Under a system of flexible exchange rates, which of the following will most likely cause a nation's currency to appreciate on the foreign exchange market?

• A) a decrease in domestic interest rates
• B) an increase in foreign interest rates
• C) domestic inflation of 10 percent while the nation's trading partners are experiencing stable prices
• D) stable domestic prices while the nation's trading partners are experiencing 10 percent inflation

---

Definitions:

Closing Entries

Journal entries made at the end of an accounting period to transfer temporary account balances to permanent accounts.

Contra Asset Account

An account that is used to reduce the balance of a related asset account to reflect its adjusted carrying value.

Credit Balance

The amount that a company or individual owes to creditors; in accounting, it indicates a balance on the right side of a ledger for liability, revenue, or equity accounts.